7

Principles of Marketing

Customer-Driven Marketing Strategy: Creating Value for Target Customers

Chapter Concepts:

1. 2. 3. 4.

Market Segmentation Marketing Target Differentiation and Positioning Positioning for Competitive Advantage

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Market Segmentation

Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs

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Market Segmentation
Segmenting Consumer Markets Geographic Demographic Psychographic Behavioral

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Market Segmentation
Segmenting Consumer Markets Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities

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Market Segmentation
Segmenting Consumer Markets Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality

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Market Segmentation
Segmenting Consumer Markets Demographic segmentation is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables
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Market Segmentation
Segmenting Consumer Markets Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups Gender segmentation divides the market based on sex (male or female)
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Market Segmentation
Segmenting Consumer Markets

Income segmentation divides the market into affluent or low-income consumers

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Market Segmentation
Segmenting Consumer Markets Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits

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Market Segmentation
Segmenting Consumer Markets Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product
Occasion Benefits sought User status Usage rate Loyalty status
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Market Segmentation
Segmenting Consumer Markets
Occasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit

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Market Segmentation
Segmenting Consumer Markets
User status divides buyers into ex-users, potential users, first-time users, and regular users of a product Usage rate divides buyers into light, medium, and heavy product users Loyalty status divides buyers into groups according to their degree of loyalty
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Market Segmentation
Segmenting Consumer Markets Loyalty status divides buyers into groups according to their degree of loyalty

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Market Segmentation
Using Multiple Segmentation Bases Multiple segmentation is used to identify smaller, better-defined target groups Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns

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Market Segmentation
Using Multiple Segmentation Bases Prizm classifications include
Age Educational level Income Occupation Family composition Ethnicity Housing Behavioral and lifestyle factors Purchases Free-time activities Media preferences
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Market Segmentation
Segmenting Business Markets In addition to the same segmentation variables as consumers, business can also be segmented by: Customer-operating characteristics Purchasing approaches Situational factors Personal characteristics
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Market Segmentation
Segmenting Business Markets Segmenting international markets Geographic location Economic factors Political and legal factors Cultural factors

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Market Segmentation
Segmenting Business Markets Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries

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Market Segmentation
Requirements for Effective Segmentation To be useful, a market segment must be: Measurable Accessible Substantial Differentiable Actionable
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Market Segmentation
Requirements for Effective Segmentation Measurable examples include the size, purchasing power, and profiles of the segments Accessible refers to the fact that the market can be effectively reached and served
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Market Segmentation
Requirements for Effective Segmentation Substantial refers to the fact that the markets are large and profitable enough to serve Differentiable refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs
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Market Segmentation
Requirements for Effective Segmentation Actionable refers to the fact that effective programs can be designed for attracting and serving the segments

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Market Targeting
Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources

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Market Targeting
Evaluating Market Segments Segment size and growth
Smaller versus larger segments Growth potential

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Market Targeting
Evaluating Market Segments Segment structural attractiveness
Competition Substitute products Power of buyers Power of suppliers

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Market Targeting
Evaluating Market Segments Company objectives and resources
Competitive advantage Availability of resources Consistent with company objectives

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Market Targeting
Selecting Target Market Segments Undifferentiated marketing Differentiated marketing Concentrated marketing Micromarketing

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Market Targeting
Target Marketing Strategies Undifferentiated marketing targets the whole market with one offer
Mass marketing Focuses on common needs rather than what s different

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Market Targeting
Selecting Target Market Segments Differentiated marketing targets several different market segments and designs separate offers for each
Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing

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Market Targeting
Selecting Target Market Segments Concentrated marketing targets a small share of a large market
Limited company resources Knowledge of the market More effective and efficient

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Market Targeting
Selecting Target Market Segments Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations
Local marketing Individual marketing

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Market Targeting
Selecting Target Market Segments

Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores
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Market Targeting
Selecting Target Market Segments Local Marketing Benefits:
Increased marketing effectiveness in competitive markets More customer-specific offerings

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Market Targeting
Selecting Target Market Segments Local marketing Challenges:
Increased manufacturing and marketing costs Less economy of scale Logistics Dilution of company image
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Marketing Targeting
Selecting Target Market Segments Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers
Also known as:
One-to-one marketing Mass customization Markets-of-one marketing
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Market Targeting
Selecting Target Market Segments
Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs. Has made relationships with customers important in the new economy. Provides a way to distinguish the company against competitors

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Market Targeting
Choosing a Targeting Strategy Depends on: Company resources Product variability Product life-cycle stage Market variability Competitor s marketing strategies
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Market Targeting
Socially Responsible Target Marketing Benefits customers with specific needs Concern for vulnerable segments Children
Alcohol Cigarettes

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Differentiation and Positioning

Product position is the way the product is defined by consumers on important attributes the place the product occupies in consumers minds relative to competing products
Perceptions Impressions Feelings
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Differentiation and Positioning

Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions Price and orientation

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position Choosing the right competitive advantages Selecting an overall positioning strategy

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Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy
Identifying a set of possible competitive advantages to build a position by providing superior value from: Product differentiation Service differentiation Channels People Image
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Differentiation and Positioning

Identifying Possible Value Differences and Competitive Advantage
Competitive Advantage is the advantage over competitors gained by offering greater value either through lower prices or by providing more benefits that justify higher prices

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Differentiation and Positioning

Choosing the Right Competitive Advantages A difference is worth establishing to the extent that it satisfies the following criteria:

Important Distinctive Superior Communicable Preemptive Affordable

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Differentiation and Positioning

Selecting an Overall Strategy
Value proposition is the full mix of benefits upon which a brand is positioned More for more More for the same Same for less Less for much less More for less

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Positioning for Competitive Advantage

Developing a Positioning Statement Positioning statement states the product s membership in a category and then shows its point-of-difference from other members of the category.

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